The Ontario government is offering a tax cut to small-business owners worried about an upcoming hike in the minimum wage and is warning that the housing market will slow down over the next year as the provincial Liberals prepare their bid for re-election.

Finance Minister Charles Sousa promised a small tax cut and $500-million in new investments for businesses facing rapid increases in wage and energy costs. The small-business tax rate will fall from 4.5 per cent to 3.5 per cent on Jan. 1, the same day the minimum wage jumps to $14 an hour from $11.60.

Mr. Sousa's fall economic update also shows that, although provincial revenues have grown over the past year due to a robust economy, the province has increased spending to match. One sector that has suffered is real estate, as the government expects new-home construction to fall next year and said it expects to collect $270-million less than projected in land transfer taxes. Despite that, the budget will remain balanced this year and for the next two years, Mr. Sousa promised.

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"We've exceeded expectations and we've grown the economy," Mr. Sousa said after tabling the update. The document, which typically focuses on the government's financial performance over the past six months, instead emphasized which new programs and spending Ontarians could expect in time for next year's election. The province's two opposition parties were quick to accuse the Finance Minister of using his economic statement as a program for Premier Kathleen Wynne's re-election.

Promising a "strong and fair Ontario," the economic update pointed to next year's higher minimum wage, a new pharmacare program for Ontarians under the age of 25, cheaper tuition, new daycare spaces, more funding for seniors, major transit projects and a housing plan that taxes foreigners and freezes rent.

NDP Leader Andrea Horwath said the budget update would do little for the middle class. "People wanted to see something that would deal with the hospital gridlock and hallway medicine crisis that we have now," she said. "There's no new money."

"They've hung their hat on a balanced budget and that's where they are going to get the money for all these goodies, except the Financial Accountability Officer and the Auditor-General have told us repeatedly that the budget is not balanced," Progressive Conservative finance critic Vic Fedeli said.

Both of Ontario's financial watchdogs have warned over the past year that the province's budget is at risk of not being balanced, especially in future years as more seniors begin to stress government programs. On Tuesday, Mr. Sousa dismissed the criticism, saying that the government has kept its books under control.

Tuesday's move to cut the small-business tax rate came nearly a month after the Liberal government in Ottawa made a similar promise to cut the federal rate. The overall rate for an Ontario small business will drop from 15 per cent today to 12.5 per cent in 2019. Bank of Montreal chief economist Douglas Porter said in a note that with both tax cuts "it's unfortunate that the focus on rate relief has fallen so heavily on one particular sector."

Critics were also quick to point out that the promised tax relief, which would lead to a maximum $5,000 tax cut for a small business, would do little to help as wage bills swelled due to the rapid minimum wage hike.

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"The tax cut won't really won't have much of an impact at all on our clients," Mahyar Hansotia, the president of accounting firm Sobel, told The Globe and Mail. The full tax cut for a profitable company might cover the increase in minimum wage costs for a single full-time employee, he said. However, the Finance Minister ruled out any changes to the government's plan.

"We will not back down from these commitments. An increase to the minimum wage cannot wait. People cannot wait, delaying an increase is denying an increase," Mr. Sousa said in the Legislature.

Within the hour, the Tories promised to do just that. While Ms. Wynne wants to increase the minimum wage to $15 in 2019, the PC Party's labour critic said that, if his party becomes the government next year, it would wait until 2022 to finish the hike to $15.

The province's Financial Accountability Office has estimated that more than 50,000 people could lose their jobs due to the minimum-wage increase – with the losses felt hardest by teens and young adults. In response, the province promised a new incentive program on Tuesday for small businesses that would pay $1,000 for each Ontarian under the age of 29 hired. The Tories called the new program a "bribe."